Instant Reaction: US Mulls Taking Stake in Intel

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1:57Bloomberg Audio Studios. Podcasts. Radio. News. This is a breaking news update from Bloomberg. Instant reaction and analysis from our 3 ,000 journalists and analysts around the world. Shares for Intel finished up 7.4 % today. This after Bloomberg reported exclusively that the Trump administration is said to discuss taking a stake in Intel. The U.S. government potentially taking a stake in the chip maker, which would help support the company's effort to expand domestic manufacturing. This is according to people familiar with the plan. I want to bring in Tom Giles. He's senior executive editor for Global Technology.

2:38Tom, can't stop talking about this story. also in the context of what happened earlier this week with NVIDIA and AMD, what's happened with MP Materials and the$400 million investment from the DoD, U.S. Steel as well, it really just feels like we're in a new era when it comes to industrial policy. What does it mean to you? You know, the Trump administration is doing some really unconventional things when it comes to trying to shape and influence industrial policy. And U.S. corporations, not a ton of precedence for this, at least not in the U.S. We've seen it in other types of economies where the government believes it's its role to shape industry and shape the direction of companies.

3:23That doesn't always end well. I'm a little surprised that the stock rallied as much as it did, to be totally honest with you. I think in the near term, investors are looking at, hey, hey, look, this is a bit of money. Think of it maybe as a bailout for Intel. Help the company get its financial house in order and accelerate these plans to build a foundry in Ohio. On its face, all of that stuff sounds good. Go ahead. I'm glad you brought up the term bailout because I was talking to Carol about this. It kind of also feels reminiscent of, you know, we talk about the US taking stakes in companies. It's not unprecedented.

4:00During the financial crisis, we saw this happen with rescuing banks. We saw it happening with rescuing automakers. The question I have for you, and it really sticks to it doesn't always end well, is the concern about when you have investment from the U.S. government, the government picking winners and losers when it comes to a so-called, quote unquote, free market. That's not a really it's not a very free market. This isn't the principles of capitalism. Hence the quotes. That I studied, certainly in macro and all the economics courses, all the finance courses that I've taken, this doesn't look like the capitalism that we learned about growing up.

4:46What this is, and there's a difference between a bailout per se and a government taking a financial stake. This is about an ongoing relationship. And again, in the short term, I see why the stock popped, right? It's seen as like, hey, Intel could use could get help wherever, you know, wherever it can. Longer term, do you really want the government? Are the government's interests aligned with those of shareholders? The government might but might want to shape things for its own political interests. But are those the interests, the long term interests of the shareholders of the company? I think that's a really good point.

5:24And I would also say, Tom, since we're talking about sort of the philosophical definition of capitalism right now, that one could maybe listen to our conversation or watch our conversation and say, wait a second. We've never really lived in a free market when local and federal subsidies power so much of this economy. I mean, you look at corn farming, for example, agriculture in the U.S. You look at subsidies that are given by states to lure businesses. We all remember what happened with Foxconn in Wisconsin, for example. That could be an entirely different conversation. But any any, you know, you name it.

6:04There are Boeing in South Carolina, for example, those sorts of things. There are different reasons that companies go places. Tax breaks all over the place. The city of San Francisco just down the street incentivized Twitter to locate its headquarters right in central San Francisco. And they have lots of incentives. Think about the corporate tax cuts that we've seen in recent administrations. Those are all ways that the government is sort of giving financial incentives to these companies and incentivizing them to make investments in a city, in a state, in a county, for example. There's a difference between that and taking a long-term stake in a company.

6:49And remember, the thing that I'm not an authority on corn farming, but I do know Silicon Valley. And if you think about how the way things have run here, things have gone historically over decades, the precedent is company X in Silicon Valley, in the tech industry, says to DC, stay out of our hair. Leave us alone, for the most part. We'll build, we'll create jobs. We'll build new and innovative technology that's going to change the way you live and work and the way we do business. And that has historically been the case. government has had a relatively hands-off stance towards Silicon Valley, but that is changing dramatically and it's changing much more quickly under the Trump administration than it has in recent memory.

7:41As long as I can remember covering this industry, what are the long-term implications? I don't think people are really thinking about that right now. It's kind of mind-boggling. We're talking with Tom Giles, Senior Executive Editor for Global Tech out there on the West Coast, here in our Bloomberg Interactive Broker Studio. Ryan Gould just coming back into our studio. Bloomberg News deals reporter. He, along with Josh Wingrove and Leanna Baker, breaking this story. It is our most read on the Bloomberg. Tom, stay with us. Ryan, I want to roll you into this conversation. Remind everybody what you found out.

8:15And, you know, do we have any insight or do you guys have any insight about how much the Trump administration, which has been called an activist administration, would want to be involved on an ongoing basis if it made this investment? Carol, we have very few details as to the numbers. I mean, it's something we're obviously looking to find out at this point. But I think it's just worth recapping that just how novel this type of structure would be or could be. I think I came on here earlier on and said that there are very good parallels to be drawn between MP Materials and the DoD, that deal. I think if you just break that down, what did that mean for MP Materials and what could it mean for Intel?

8:52I mean, you look at that deal, it's something like, you know, guaranteed purchases, loans, private financing, equity investment. I think these are all types of things that the government perhaps feels. And again, this is what you would think from a sort of outside view looking in, that if you give confidence capital in this sense, which I think is a good way to think about what this would be for Intel shareholders. If you give confidence capital to Intel as the most credit worthy institution in the world coming in and saying, we're behind you, we're here for the long term. That's a massive draw, especially if you're Intel and you're looking to bring in customers like Apple or Qualcomm, which, by the way, has been its mission for a long, long time to make its foundry solvent.

9:34Tom, is that what Intel needs confidence capital? Is that what's going to be the turnaround key for this company that's been kind of struggling for a while? It has been struggling. I mean, you think about what, where they're lacking, right? They have fallen behind technologically, particularly in an age of AI. They are, they have lost market share. Lip Bhutan, the CEO, has come in and he has been cutting jobs and taking some hard steps financially to shore up them from a financial perspective but in terms of products in terms of like making themselves attractive making themselves the place that customers around the world want to come for their chip making needs that's something where they've fallen desperately behind and so if you have a foundry i mean on its face the idea of building a foundry that's that's a an alternative to TSMC, this Taiwan-based mammoth company that is making most of the most advanced chips in the world.

10:41Customers want an alternative to that. Ryan mentioned Apple. NVIDIA, they all would like to have alternatives to TSMC. You don't want someone to have a monopoly, right? So there are certain things about this idea of advancing this chip-making capabilities for Intel in Ohio. It makes sense, but it's really hard for a company that's struggling financially to get that off the ground. So again, getting back to that near-term equation, it makes sense for them to get a capital infusion in the near term. Longer term, does it make sense for the federal government to be making decisions and to be influencing the direction of companies?

11:21In many instances, the interests of the government and the shareholders may be very much aligned, but there will come a day where the government may want to politicize things in a way that doesn't work to the longer-term advantages of shareholders. That's the thing that people need to be asking hard questions about right now. Yeah, exactly. Tom Giles, so appreciative. Senior Executive Editor for Global Technology with his view and reporting there also on Intel. Intel shares still up about 2.8 % here in the aftermarket. I want to keep Ryan Gould in here as part of the team that broke the news that's still moving shares of Intel higher.

11:55Once again, more than 7 % to the upside earlier in the session, up another 2.9 % as we speak. Ryan, I want to go to you off of what Tom just said, the difficult questions that need to be asked right now, because you and the team write about the president and his administration are adamant about boosting domestic champions in sectors that it deems critical to combating China on national security grounds. I can imagine there are a lot of companies out there with executives who are raising their hands and saying, wait a second, I'm critical. Where's my money? Exactly. I think, Tim, you raise a good point, because if you're any other company that operates in semiconductor manufacturing or even semiconductor chip design.

12:39Hey, this isn't fair. Yeah. I mean, you would be looking on and thinking, what is the power play here? Yeah. I mean, A-MAT's down 23 % following its latest quarterly update. I'm not saying anything is related, but it's like, hey, maybe I need an assist. And, you know, if you think back, let's just retrace those steps a little bit. Some of these challenges and some of these questions are being raised a couple of months ago, quite a few months ago now, before Lippu Tem became the CEO. When Pat left, you know, there was a big search that went underway. They used a headhunter. They spoke to people like Gary Dickerson at AMET about the job.

13:10I mean, they spoke to a ton of people about the job. There is actually only one person who really wanted that job for the challenge that is on the table right now. And that is Lippu Tem. But Libby 10 is currently in that seat. He turned up at the White House earlier this week, cut a fairly confident figure walking into the White House grounds, and is now, on the face of this, coming out with something that looks like a potentially very favorable deal, at least in the short term, I think, to Tom's point earlier on, at least in the short term for what Intel is looking to do, which is right-size its balance sheet, stem some of those losses, and make, sorry to use a Trump term, but make Intel great again.

13:48uh it's kind of wild kind of wild um before we get caught up in the exuberance that it's very easy to get caught up in this environment especially when you've got a stock that pops seven percent in the regular uh trade another three percent here in the aftermarket early stages like do you have any you guys talk to a lot of folks you reported this out it's a bloomberg exclusive it's a most read story but do you have a feeling of again i'm going to go back to kind of where this process may be? I mean, we actually don't. I mean, that's one of the challenges is, you know, finding out how big this is.

14:21I think, you know, we're on the case. I'm sure many of our competitors are now on the case. But I think one of the things I'd point out is that the president said on Truth Social this week that these meetings would be happening with commerce and with Treasury this week. You can probably assume that there are a ton of people down in Washington right now, both on the Intel side and the government side, who are putting minds together to figure out exactly what it will require. to get Intel on a stronger footing. I think, you know, if you look at what Intel has said, it declined to comment, I should note, on the deal discussions.

14:51But it said in a statement to Bloomberg that it remains deeply committed to supporting Trump's efforts to strengthen U.S. technology and manufacturing leadership. Just quickly, we've not heard anything from the White House? Not yet. Okay, good to know. You rock, again. Ryan Gould, deals reporter here at Bloomberg news. Again, Intel shares, Tim, up here in the aftermarket after about a 7 % gain in the regular trading session.

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